Rock Health Summit 2020 Takeaways: Digital Health Is Firing on All Cylinders

Fenwick & West Life Sciences Group
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Fenwick & West Life Sciences Group

When investors survey the digital health sector today, they see nearly every number trending upward.

There is more deal volume than VCs have seen in past years, with the third quarter of 2020 outpacing anything they’ve seen in the past by double-digit percentages. There are more veteran healthcare investors making bets in digital health, and there are more newcomers with little to no prior healthcare experience jumping in with both feet.

Investment activity by corporates and strategics is up,  and appetites for digital health offerings among public-market investors are increasing.

Mature digital health companies are reporting higher revenue, and offering more proof points that their technologies are improving patients’ lives. These companies are raising more funding than they may have done in the past, and at higher valuations. And there are more exit opportunities for these high-quality companies than there were a year ago.

Investors, company founders, policy experts and healthcare professionals at the Rock Health Summit talked about the digital health sector from their point of view. And the word “more” was used consistently.

No Concerns about a Digital Health Bubble Yet

Investors at times worry when too much capital floods into any sector, even the hottest ones. This happened in cleantech more than a decade ago, and billions of dollars were lost.

During a panel on investing during a pandemic and a recession, speakers noted that the digital health sector a decade ago was seeing activity worth about $1 billion. This year, the figure is somewhere between $11 billion and $12 billion.

But investors are not sounding the alarm over the formation and eventual popping of a bubble in digital health. This is because the market for new healthcare solutions is enormous. At the same time, regulators have relaxed many of the rules that functioned as barriers to the mass adoption of digital health programs, and payers have begun reimbursing more freely for their use.

And most importantly, mature digital health companies—of which there are many today—have shown they are more than ready to meet the challenge of our country’s changing healthcare delivery model brought about by the pandemic.

A Post-Pandemic World

Panelists were asked what it will take for the current utilization of digital health products and services to outlast the spread of COVID-19, and the shelter-at-home orders that came with it.

Many panelists—whether they were company founders, investors or healthcare executives—said virtual care and other innovations will have a permanent home in our healthcare system if they can address long-standing problems that our brick-and-mortar system has not been able to remedy.

High-quality care is unevenly distributed in America, with rural and other underserved areas all but cut off from the expertise found at top medical centers. If telemedicine and other programs can level the playing field—and democratize access to the top minds in medicine—this will boost the staying power of digital health.

New digital platforms should also address the high cost of healthcare, and integrate mental health with primary care—both issues that have been unaddressed for too long, panelists said.

Digital health technologies should also move us toward a new paradigm, where we analyze the social determinants of health in order to encourage wellness, rather than merely treating sickness once it has taken root.

Taken all together, these goals are a tall order. But the Rock Health Summit showed just how many brilliant minds are bearing down on the problems in our healthcare system, all at the same time.

It won’t happen overnight, and we could see a “correction” when it comes to company valuations and the amount of money going into digital health.

But new innovations are already making inroads on some of healthcare’s most intractable problems, and an enormous market should keep propelling the sector forward for quite some time.

Digital health may cool a bit from it’s current, white-hot status. But it won’t be going cold any time soon.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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